Federal spending during the pandemic changed lives. What happens now that it’s gone?

During the crisis of the global COVID-19 pandemic, the U.S. federal government made unprecedented investments to help people and families survive. In 2021, Congress increased the amount families could claim for a Child Tax Credit, made it a monthly payment, and enabled families too poor to pay taxes to qualify for it for the first time. Lawmakers protected people from evictions, and spent more than $1 trillion to bail out industries, shore up businesses, “rescue” states, stabilize the child care industry, and, among other interventions, provide stimulus checks and increase unemployment benefits. An additional $600 a month in unemployment insurance in 2020 and $300 a month in 2021 kept millions who’d lost their jobs from spiraling into poverty and misery.

Zach Parolin is an assistant professor of social policy at Bocconi University in Milan, Italy, and a senior research fellow at Columbia University’s Center on Poverty and Social Policy. In his new book, Poverty in the Pandemic: Policy Lessons from COVID-19, Parolin painstakingly analyzes the real-world impact of these investments. And while they were, indeed, life-saving, his research shows they proved a “fragile victory” in that they didn’t “solve” poverty in America: the United States still has among the highest rates of poverty, and child poverty in particular, of comparably-industrialized nations.

I spoke to Parolin about what he found and what it will take to truly tackle poverty in America from his home office in Milan, where he was also caring for his 8-month-old daughter, The conversation has been edited for length and clarity.

Brigid Schulte: You've written a powerful book analyzing the unprecedented federal spending during the pandemic and its impact on families in poverty. What are some of your key findings?

Zach Parolin: Go back to, let's say, April 2020, and remind yourself of where you were then. And if you remember the massive job loss that was occurring in the country at the time, if you would’ve guessed what would happen to the national poverty rate over the coming months or the coming years, more than likely, you would have said things are about to get very bad with respect to poverty, and with respect to families’ and households’ ability to meet their basic needs.

You might remember the Great Recession just 10 years ago, when, sure enough, higher unemployment contributed to more poverty and more hardship. But the federal government stepped in many times in really extraordinary ways during the pandemic and demonstrated that, when it wants to, it has the remarkable capacity to reduce poverty, increase income, and make life better for millions of households across the country.

If we look just big picture at two of the largest spending packages introduced during the pandemic—in 2020, we had the CARES Act that provided stimulus checks and expanded unemployment benefits. So even when the unemployment rate climbed to about 19 percent, poverty was falling as a result of the government intervention.

Fast-forward to 2021. The Biden administration came in and introduced the American Rescue Plan Act, with the expanded Child Tax Credit in particular, which provided support to families who often didn't get it before the pandemic. That cut child poverty nearly in half, reduced food hardship, and increased families’ consumption of things like child care, food, and groceries. It had the American welfare state performing at the level of Belgium’s and Norway’s for the first time.

So, the policy responses were extraordinarily successful: They reduced poverty and, in fact, brought the 2021 poverty rate to the lowest level in U.S. history, at least dating back to 1967, despite relatively high unemployment. These were really an extraordinary set of outcomes, especially considering what could have happened if the government had not stepped in in the way it did.

Schulte: You write about how two policies, in particular, had enormous positive impact: the expanded Child Tax Credit, which, as you say, lifted 3 million children out of poverty, and expanded unemployment insurance, or UI, benefits.

Parolin: The expanded Child Tax Credit in 2021 provided cash support on a monthly basis, even for families with children who weren't formally connected to the labor market and earning enough [to pay taxes]. That's a policy that almost every other high-income country had prior to the pandemic. There's an incredible amount of evidence that the Child Tax Credit was successful at reducing poverty, reducing food hardship. It had no negative effects on employment in the first year. It brought the U.S. child poverty rate in line with Germany's, as opposed to being twice as high.

That policy, in particular, is something that could easily be brought back if the political will exists. [Editor’s Note: A bipartisan House passed a scaled-down version in late January, but as of mid-March, the measure has been stalled in the Senate.]

Schulte: What about unemployment insurance? These state-run systems have been underfunded for years, and they don’t work well: The benefit typically covers about 30 percent of those eligible. Some states make it difficult to apply for and reject a majority of claims filed. It doesn’t last very long. Some systems run on ancient software. And, in some states, the replacement rates are so stingy that most people can’t survive on them. Our unemployment system seems to have a punishing aspect rather than seeing unemployment as a time that could be used for training for better jobs, like in Germany. What did we learn during the pandemic that we should be taking forward?

Parolin: This is another case where the events of the pandemic made clear that the way we administer unemployment insurance in this country is maddening. Access to unemployment benefits is much more difficult than it needs to be.

We can look at the inability of many jobless adults to actually access benefits that they deserve and paid into the system for. We can look at April 2020 and maybe give state governments a little bit of slack since so many people were applying and the systems weren't ready. But even in typical times, even today, when someone loses their job, they face a series of administrative burdens, particularly in red states. Even now, when fewer people are applying for unemployment insurance, as opposed to the number that were in April 2020, a lot of them just aren't getting it. They're being weeded out of the application process at various checkpoints that, in some cases, are designed just to make it hard for people to get the benefits.

One of the things that happened in the pandemic was that, even if you had a relatively weak attachment to the job that you were laid off from, you could access unemployment benefits through a program called the Pandemic Unemployment Assistance, or PUA, program. That really widened the net in terms of who could get access to these benefits.

Generally, the reimbursement rate is quite low, as you noted. During the pandemic, it was different. In 2020, we saw a $600 per week supplement, and in 2021, we had a $300 per week supplement from the federal government.

The evidence suggests that the more generous benefits did a really strong job of allowing families to meet their basic needs without too much of a cost in terms of delaying reentries back into the labor market.

And that's a lesson that states and the federal government could carry forward by asking, “How do we help more people when they lose their jobs?” That particular program, with some modifications, could provide a roadmap to that in the future.

Schulte: Why haven’t we learned that lesson yet?

Parolin: There’s a peculiar aspect of the American welfare state in that many of the core components of the social safety net, like unemployment insurance, are delegated to state governments, as opposed to the federal government. So instead of having one very well-funded, high-potential machine—the federal government—administering these benefits, we're saying to 50 different states, “You figure it out, despite the fact that you are not as well-resourced, and you might have less general expertise.”

And a lot of states just don't care and don't want to put much money into it. So the incentive for state governments to, now after the pandemic, invest more money to reform our unemployment insurance system and give out more funds to workers is not fully aligning with [the priorities] of a lot of state governments and state legislators.

The federal government could do more to compel states to reform their UI systems. This bizarre, multi-tiered structure of how we administer social insurance benefits in this country is one of the reasons we're not seeing tons of change in the UI system.

Schulte: Do we have any evidence that there were long-term impacts of this unprecedented spending on the social safety net? Did it help propel some people out of poverty for the long-term? Or did it just help people get through a really difficult period?

Parolin: What the evidence would suggest is that if you spent your life in poverty, and you entered the pandemic in poverty or with a medium or low income, these investments were essential in keeping you afloat and making sure that you didn't have to lose your home because of this, hopefully, once in a lifetime health crisis that disrupted the labor market in an unprecedented way. You didn't have to go days or weeks without food or other essentials. The federal investments, to a large degree, ensured that fewer people would have to face that kind of hardship.

But it didn't fix the structural and long-term challenges of poverty that this country has.

Poverty is not just a single point-in-time state. It's a condition that lingers over your life once you've experienced it. There are health challenges associated with growing up in poverty. There are neighborhood conditions associated with higher poverty rates. The disadvantages accrue throughout someone’s life. The additional aid in 2020 and 2021 didn't make those disappear for good. It just helped out quite a lot temporarily. Though the federal government's interventions were extraordinary, they weren't the antidote for fixing long-term poverty problems.

There's still a lot to do, especially to support those families who were already struggling to make ends meet before 2020.

Schulte: You make that point in your book, likening poverty to a pre-existing condition. One chart I found particularly arresting. You found that, compared to adults who’d never been exposed to poverty, adults who’d experienced poverty as children had lower average incomes at the start of the pandemic, higher likelihood of dying from COVID-19, and faced food insecurity, higher unemployment rates, had less ability to work from home and less access to monthly Child Tax Credit payments.

Parolin: This is a really important thing to bring up. It's one thing to look at the pandemic from the lens of poverty and say, “We had an extraordinary success. We reduced poverty. We had the lowest poverty rate in U. S. history. “That's true. That's important. And that needs to be recognized.

But at the same time, the evidence I show in the book is that despite all that, if you had a history of poverty behind you when the pandemic began, you were substantially more likely to face the greatest health challenges during the pandemic. U.S. counties with the highest poverty rates, for example, had twice the per capita COVID death rate relative to U.S. counties with the lowest poverty. That gap that we see among U.S. counties is the same as the gap between low-income Romania and high-income Luxembourg in the European Union.

At the individual level, we also see that if you enter the pandemic with lower income, you’re more likely to have died as a result of COVID-19. If you went into the pandemic in poverty, you were about twice as likely to lose your job relative to someone with a higher income. Poverty was a preexisting risk factor in the context of the pandemic.

Schulte: So what would it take to solve poverty in America? Matthew Desmond argued in his book Poverty, By America that if we collected the $175 billion in taxes owed by the very wealthy every year, we could ensure that every person in the United States had a safe place to live and enough to eat.

Parolin: This broader idea that we need a stronger and sustained investment from the welfare state or the safety net is absolutely right. One of the reasons why the temporary intervention during the pandemic didn't solve poverty in the U.S. is because so many people who are receiving that income support had a long history of poverty behind them from when the federal government was not operating at the same capacity. They're carrying the scars of that lack of investment forward—and those scars don't just disappear. So ensuring that future generations, that today's children, don't develop those same difficulties associated with growing up in poverty would be a great way to ensure that fewer adults and fewer people, in general, are facing poverty and its consequences.

What does that mean? It might mean something like a permanent version of that expanded Child Tax Credit or a stronger unemployment insurance system to protect those who lose their jobs. So wherever the revenues come from, generating a stronger, more durable welfare state, especially for families with young children, is a great place to start addressing America's poverty problem.

But we also need to pay attention to a number of other factors that expand beyond income that also affect poverty. Place matters. Structural racism matters. And these are not areas where the federal government can wave a wand and make something disappear.

It means thinking about if you live in Appalachia or in certain parts of the country where economic opportunity is not at your doorstep. How do we support people in these communities? How do we help to build stronger economies for people who have maybe been left behind by the deindustrialization that's occurred over the last 30 years or so?

Schulte: For a project we’re working on, we’ve been talking to people who’ve been living in poverty—or on low wages—and exploring how these extraordinary pandemic investments made a difference in their lives. We're hearing things like, “I really felt like the government cared about me, that they could really help me.’” “I felt like I belonged.” Or that they didn’t feel stigmatized, forgotten, or left out. And now that the programs and the help have expired, there’s almost a sense of not just resignation but betrayal.

Parolin: That’s really fascinating, and based on some of the work I’ve read and individuals I’ve spoken to, this resonates. Jamila Michener is a political scientist at Cornell who wrote a book, Fragmented Democracy. It really captures the interplay between what the state and federal governments provide. And how individuals and the extent to which they trust the state, the extent to which they want to participate in democracy by going to vote, and the extent to which they feel like the state is here for themme, as opposed to working against themme, matters.

It matters for whether someone's going to show up and vote. It matters for how someone feels about the administrative structure around them, and whether it's working for them or against them. It matters for whether they can afford the groceries or not.

I could totally understand that sense of feeling like, “‘The state was helping me. It was allowing me to live a better life. And then it stopped. And now I'm back on my own again.”’ Betrayal seems appropriate for describing that experience.

What we saw during the pandemic is the federal government can help in extraordinary ways when it wants to. And it seems imperative that it does more of that rather than less.

Schulte: Another thing that strikes me, the more we talk to people who live in poverty, is thethat there’s such stigma and stereotyping they face. Just think of the lawmakers in Congress who didn’t want to extend benefits after the pandemic— - or fund much of a safety net ever— - because they thought people would be lazy and not go back to work. I’m thinking how former Republican House Speaker Paul Ryan claimed “generous” benefits would be a hammock, not a safety net, even though our stingy safety net has never been enough to cover a family’s basic needs. There’s a real sense of blame, and harsh judgment that people are in poverty because they just didn’t work hard enough, or made bad choices, or just need more grit.

Parolin: There's been a strong “otherness,” or people trying to drive this wedge between the “undeserving poor” who just haven't worked hard enough, who just made too many bad decisions. And not only do they not deserve our support, but their way out of poverty is to overcome all the obstacles in their way and start making better choices, and magically, things will be okay again.

That’s really a false understanding of how disadvantage is generated in our society. You can’t have this conversation without also looking to the mid-1990s and understanding what was behind the fact that people were so angry over AFDC (Aid to Families with Dependent Children) or what welfare benefits ensured. Why did they want to end welfare as we know it? And what was the rhetoric behind all that? And a lot of this points back to racialized perceptions of who is receiving social assistance benefits.

People tend to attach strong racial biases to who they think is receiving government support and also who they think aren’t working hard enough. The facts generally don't bear out these false perceptions. But they're strong in driving down political support for a more generous welfare state that works better for everyone.

Schulte: Is that part of the reason why Congress let these programs expire, even after seeing so much success in making life better for so many people?

Parolin: There was a mix of challenges. Some of the pandemic-era interventions were very particular to the moment—things like stimulus checks and some of the massive expansion of unemployment payments that we saw in 2020. These were really crisis-era policies, and we shouldn't necessarily expect them to come back in, say, 2024 in more typical economic times.

At the same time, there was a whole set of policies that were not particularly about the pandemic.

My sense is that the debates around government intervention after the pandemic have reverted back to their old, tiring debates about fears that if we do expand this cash assistance for more families with children, large shares of parents will drop out of the labor market and perhaps reduce the anti-poverty efficacy of this type of policy.

The evidence from the pandemic doesn't point to that type of job loss. There could be some. But probably not to the extent that some of these researchers are showing. In short, politics is the answer. But there is reason for hope.

Schulte: What gives you hope?

Parolin: Despite the fact that poverty rebounded in 2022, despite the fact that most of the policies that were implemented and that were successful in reducing poverty during the pandemic are gone, I do think policymakers have learned some lessons from that intervention.

Policymakers have seen this evidence and they realize, “This might be something we can bring back.” If there is to be an expansion of the Child Tax Credit in the coming months, that might not have occurred had we not witnessed how powerful it was during the pandemic.

Politics; it's messy. It takes time, but lessons are learned, and over time, we tend to see progress.